Farmers failing to use tax allowances
Farmers are needlessly paying thousands of pounds in tax by not making full use of their annual pension and savings allowances, according to rural insurer NFU Mutual.
“The Office of National Statistics show that only 45% of self-employed men contribute to a personal pension, and my experience talking to farmers about pension planning indicates the figure in agriculture is even lower,” NFU Mutual’s Shelagh Hamer said.
“One of the main reasons is that many farmers still tell me they will never retire, or will take their retirement income from the farm.”
But, farmers who don’t invest in a pension put their own financial security at risk and put extra pressure on the farm business to fund their retirement, she said. “They are also missing out on potentially millions of pounds in government money to help fund their pensions.”
NFU Mutual urges farmers to review their finances before the end of the tax year on 5 April and has issued some “top tax tips”:
| Pensions |
|---|
| • Personal pension contributions benefit from tax relief at 20% for basic rate tax payers and up to 40% for those at the higher tax rate |
| • Most pension contributions are paid net of basic rate tax and the sum grossed up by the tax relief |
| • Those paying higher rate tax can claim a further 20% through their tax returns |
| • Up to £3,600 a year can be put in pensions for children, grandchildren or non-working spouses with full tax relief available on contributions |
| Investments |
|---|
| • The annual Individual Savings Account allowance is a maximum of £7,200, which can be paid into a “stocks and shares” ISA or split between a stocks and shares and a cash ISA |
| • No tax is charged on investment returns other than tax withheld on dividend payments that cannot be reclaimed |
| Capital Gains tax |
|---|
| • Annual individual exemption for the 2008/09 tax year is £9,600 – it is a “use it or lose it” allowance |
| Inheritance tax |
|---|
| • Reduce IHT liability by making gifts using your annual IHT capital gift allowance of £3,000. The allowance can be carried over by one year |